Taxation: who? ( the rich--how to define them ) and what? (what they consume.)

randomfinancialthoughts.blogspot.com makes a cogent argument about taxation.

http://tinyurl.com/dedjac

RFT asks, "What or who should be taxed?" in the interests of fairness, and societal good. The current mantra is tax "rich people" but who are they and why? Analysis shows that income isn't the best surrogate of "rich"; wealth is better. The best reason for taxing the rich disproportionately more ( otherwise it's a flat tax ) is the greater burden they put on society. However, the wealthy don't put a burden on society until they drain society's resources in their own interests. The example of the decibillionaire Warren Buffett is cited with the observation that he is likely not to have spent more than $10Million on himself during a lifetime of almost eighty years. A strong argument is made that the proper thing to tax is consumption since that is when someone actually takes from the resources of society. When a person is working and producing she is adding to society's resources. (We recognize the Paradox of Thrift--what makes sense for individuals is not good for a consumerist society-- and that this might not be the best time to change things.)

It's an unstable system when approximately 50% of the electorate doesn't pay taxes. Aristotle predicted this situation almost 2500 years ago and said that, when the majority can offload the tax burden onto a minority, "it will destroy the polis." This is because the majority has every incentive to vote more benefits and no incentive to lower taxes. The taxpayers either move or stop paying for one reason or another. (If it's an income tax, they can always stop working and devote more time to leisure. They generally will not stop consuming as quickly, which is another argument for preferring a consumption tax.) Fact: Michiganders are leaving in droves. Prediction: Illini snowbirds will increasingly choose to spend an extra month or two to change residence to Florida or Arizona.